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Catastrophe Bond |
Also found in: Wikipedia | 0.01 sec. |
Catastrophe Bond A high-yield debt security backed by insurance premiums. Insurance companies issue catastrophe bonds in order to raise funds for hypothetical insurance payouts resulting from one or more stated events such as floods or fires. The bondholder receives coupons from what the insurance company collects in premiums. However, if the insurance company suffers a loss from a payout of one of stated events, the obligation to repay the bond is either relaxed or forgiven. The main advantage to a catastrophe bond, despite the stated risk, is the fact that it offers a high yield without much regard for the performance of the broader economy because people and institutions will almost always set money aside for insurance premiums. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| For an increasing number of reinsurers (as well as primary insurers), mortality catastrophe bonds provide the answer. The real problem with something like catastrophe bonds is that investors are still going to want to know what kind of risk they are going to be subject to," DePoy said. We use AIR's CATRADER for evaluating catastrophe bonds with a range of trigger types, including indemnity, index and notional portfolio-based triggers. |
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